On Monday, Microsoft put an end to speculation by confirming it had entered an agreement to acquire GitHub, the popular coding collaboration and hosting site, for $7.5 billion in an all-stock deal.

GitHub was founded in 2008 in San Francisco as a way for software developers to share code and collaborate, and has become an essential platform for modern software and many open-source programmers. Its business tools are used by both small and major software-related companies including Airbnb, Amazon, Facebook, Apple, Google, Microsoft and Spotify.

Nat Friedman, former CEO of Xamarin and current Microsoft executive will lead GitHub following the acquisition. Microsoft has stated the company will continue to operate independently as "an open platform for all developers in all industries." It went on to promise developers will be able to work in any language, operating system, cloud or device.

Critics have argued the sun is setting on Microsoft's credibility with developers, especially compared with its heyday of PC dominance, because it missed the smartphone revolution and doesn't have a consumer digital speaker product. The company has hoped its Azure platform would fill that gap, and much of Azure's growth has stemmed from the open-source community: according to the company, 40 percent of all virtual machines in Azure run on Linux, and its Visual Studio Code tool has the largest open-source community on GitHub and globally.

Microsoft Embraces Open Source

The acquisition shows how far Microsoft has evolved under CEO Satya Nadella, particularly compared with the days where Steve Ballmer virtually declared war on open source. It also reflects the company's shift away from a complete dependence on its Windows operating system. Microsoft will be able to strengthen its relationship with developers and tap into a broader audience within the open-source community — more than 27 million developers around the globe maintain 80 million projects on GitHub. Microsoft already supports many versions of Linux and has used open-source models in some important cloud and developer products. The acquisition marks another major step in that direction.

This is a clever and positive move by the firm. Its cloud computing business has become an essential source of growth, but it's facing fierce competition for developers from the likes of Amazon, Google and others. Most importantly, artificial intelligence and the internet of things are now the core pillars of Microsoft's corporate strategy, reinforced by Nadella over the past 12 months through concepts such as "the intelligent cloud" and "intelligent edge." Developers are the leading actors in this vision, confirmed in his keynote speech at the company's Build 2018 conference when he said, "you have enormous power."

Developers in the areas of artificial intelligence and internet of things are scarce and hard to reach. Most advanced projects in both areas have started in the open-source community as a trusted environment to learn, share code and collaborate. Google of course understood this, and bought Kaggle, an open source data science and machine learning community in 2017 as a key asset for its artificial intelligence strategy.

These are clear reasons why buying GitHub makes good sense for Microsoft. It helps extend its reach, visibility and potential for influence into this important community, and will help to bring its slower, traditional enterprise developer base into these new areas more quickly.

Critical Factors to Success

The success of the deal will be determined by two important questions. The first is how the GitHub community will react to the news. Although it's hard to say with certainty at this stage, some developers will likely see the move as characteristic of the "old Microsoft" and jump ship to other platforms like GitLab, for instance. Others, and perhaps the majority, will choose to wait and see. Much of this reaction will depend on the steps Microsoft takes next.

The second big question is what Microsoft will do with GitHub from here. I expect it to fulfill its promise of keeping GitHub independent and neutral, as Nadella understands the implications of doing otherwise. The firm does have precedent in understanding communities, thanks to its gaming and LinkedIn assets. For the most part, LinkedIn has been run at arm's length and independently since Microsoft bought the business, and this has been an effective approach.

What Next for Microsoft and GitHub?

Over time I believe GitHub's proximity to Microsoft will influence the roll-out of new Azure developer and computing services, especially in artificial intelligence and the internet of things. The recently launched Azure Sphere, which is based on a custom Linux kernel, is a good indication of how open source can affect Microsoft's product direction. GitHub's influence could also factor into some of its future collaboration tools, such as features for developers using Teams, although Microsoft would have to tread carefully in these areas.

Some observers will, of course, be left perplexed by the deal, unable to reconcile the decades-old antipathy between the open-source community and the company behind Windows. But that view ignores the reality of writing, sharing and using software in 2018. Microsoft already has the most contributors on GitHub, and has made no secret of its desire to embrace new ways of doing things.

Another intriguing aspect is how Microsoft's competition will respond. The announcement arguably produced more noise among developers than news from Apple, which held its worldwide developer conference on the same day. It will also be fascinating to watch Google, which sees a significant portion of its TensorFlow projects operate in GitHub. It's going to be an eventful 12 months ahead.

About the Author

Nicholas McQuire is vice president, enterprise research and artificial intelligence research at CCS Insight. He has over 15 years' experience in enterprise technology advisory services, most recently as managing director of the Global Enterprise Mobility Alliance.

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